This could be the year that Apple (NASDAQ:AAPL) dividends return, according to a recent Bloomberg article. The tech industry behemoth last paid out in 1995, before late founder Steve Jobs returned to the company and regenerated the brand.
Dividend rumors are fueled by the company’s $500 billion-plus market capitalization and $97.6 billion in cash and investments. Bloomberg estimates that Apple would pay a quarterly dividend of around $2 a share, which would cost the company about $7.46 billion per year. Stern Agee analysts earlier this month predicted dividends of 2% to 3%, in line with the current dividend payments of Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC). An alternative, one-time payment could also emerge as a possibility, as it would reduce stock and tax risks associated with the deal.
Too, a dividend announcement could attract investors who deal only with companies offering dividends, as well as many other prospective investors who have expressed interest in the dividend option.
The payout for some could be significant. Investor Fidelity Management & Research, for example, would stand to make $97.2 million a quarter if Bloomberg’s dividend estimate proves accurate. In determining its estimate, Bloomberg said it took into account the dividend size of other large technology companies, Apple’s projected earnings for next year, and the amount of money on its balance sheet.
The Right Thing to Do?
The argument for a dividend is hardly arcane. And as time goes on and the company’s earnings and cash continue to grow, the argument appears to become more firmly grounded in common sense. “Why not do the sensible thing and begin to share part of the capital that any rational person would say is beyond what the company needs to sustain itself with shareholders,” Keith Goddard, CEO of Capital Advisors, an Apple shareholder, told Bloomberg.
As has been noted time and again, Apple can more than afford a dividend payout. CEO Tim Cook has acknowledged that Apple’s cash hoard is “more than we need to run a company.” In the first quarter of fiscal 2012, Apple brought in $16 billion, and analysts predict a total of $75 billion this year. Analysts who spoke with Bloomberg listed the company’s continued monetary successes as a primary reason that Apple may finally bow to investor pressure on the issue.
Dividend rumors should be taken with a grain of salt, though. As InvestorPlace contributor Kevin Kelleher noted in January, much of Apple’s cash is invested in countries with lower tax rates and, barring a U.S. tax holiday, would have to be repatriated at a fairly hefty tax rate to make a dividend payout. And if competitor Google (NASDAQ:GOOG) remains dividend-free, why shouldn’t Apple, particularly if it wants to avoid departing too severely or too soon from the late Steve Jobs’ belief in keeping cash to cushion against innovation risks.
The fact is that investors aren’t going to jump ship on Apple if dividends remain off the table. Apple closed Wednesday at $542, and its market cap topped the $500 billion mark this week on anticipation surrounding its upcoming release of the iPad 3. With numbers like that, the dividend issue will continue to attract attention, but it still might not gain traction with Apple management.